A wave farm which would provide free energy to 7,500 homes is set to be built off the coast of Cornwall after £21.5m in funding was secured.

The hub would collect energy from wave turbines off St Ives Bay and meet 3% of Cornwall's electricity needs.

The Regional Development Agency (RDA) which supplied the final funding said it would make the South West a world leader in wave energy technology.

The hub could be built in 2008 if ministers give it planning permission.

Power from up to 40 floating wave energy devices located 10 miles (16km) off St Ives Bay would come ashore via a 15-mile (24km) cable to a new National Grid sub station.

Surfing risk

The plans are now subject to final Government and European Union approval.

Nick Harrington, of the RDA, described the funding as a major step forward.

"It's not the last decision to be made, but it does demonstrate the RDA itself now feels the project is far enough developed that it can give its seal of approval to it going ahead," he told BBC News.

The project is expected to generate £76m over 25 years for the regional economy, and create at least 170 jobs.

Power would be collected from floating wave energy devices

Mr Harrington said: "From our point of view, this is about creating a new industry.

"You know, Cornwall sadly needs new industry to compensate for the loss of mining over the last few decades and it is an opportunity to use the resources off the coast to really establish a position for Cornwall right at the start of a new industry."

Three wave device developers have been chosen to work with the South West RDA on the project.

BWEA, the trade association representing the wind, wave and tidal energy industries, backed the project, saying it was crucial for the success of wave energy development.

Some surfers are worried the wave devices could take energy from the waves and reduce wave heights by up to 10%, putting the surfing industry in Cornwall at risk.

But the environmental campaign group, Surfers Against Sewage, said it supported the project.